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Thursday, January 5, 2012

Do deficits and the national debt matter?

Thanks again to Dr. Rothman for sending this along....


http://worthwhile.typepad.com/worthwhile_canadian_initi/2012/01/the-30-years-debt-burden-non-war.html

5 comments:

ArmChairEconomist said...

Hey doc, random question here. I realize that fed memener banks must purchase stock into their district and thus become "owners" creating the public-private aspect if the system. The question is that is each institution required to purchase the same (nominal) amount in stock or is it based on institution size or do institutions have own preferences as to the amount they want to purchase?

Randall Parker said...

Hi Armie: Old rule to live by...when you don't know, ask someone who does. Here is your answer from Robert Hetzel who has worked at the Fed of Richmond for decades.

Six percent of their capital. See below for details.

Member banks (other than mutual savings banks) subscribe in an amount equaling six percent of capital stock (which includes common and preferred shares) and surplus, less any deficit in the aggregate of: retained earnings, gains and losses on available-for-sale securities, and foreign translation accounts. Once a member bank's report of condition (submitted quarterly) reflects a cumulative increase or decrease in capital and surplus requiring a change of more than 15 percent or 100 shares of its Reserve Bank capital stock (whichever's less), the member bank applies to receive or cancel enough Reserve Bank capital stock to meet the six percent subscription threshold.

Twice a year, after the submission of the Q2 and Q4 call reports, Reserve Banks will affirmatively notify member banks needing to adjust their holdings.

ArmChairEconomist said...

I live by that rule, and it gets used a LOT.

Thanks, that certainly explains it. I couldn't find anything online.

Are there implications of some financial institutions being larger stakeholders than others?

Randall Parker said...

Armie: That does not strike me as important at all, unlike the Dodd-Frank bill where it seems smaller banks are going to get squeezed sooner or later.

ArmChairEconomist said...

I wasn't sure if having a larger share in a bank's respective district would be akin to being a large shareholder of a public company - increased power, authority.........